Accountancy: Basic Knowledge

By O P Mishra


 
















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Accounting Equation

By O P Mishra
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  https://www.blogger.com/blog/post/edit/8860325726841885571/4923302030264149705 Accounting Equation MEANING OF AN ACCOUNTING EOUAIION An Accounting Equation is a mathematical expression which shows that the Assets of a firm are equal to the sum of its liabilities and the capital contributed by the owner. Assets = Liabilities or Claims of Outsiders + Capital or Owner’s Equity OR Capital = Assets – Liabilities OR Liabilities = Assets - Capital The above relationship is known as the Accounting Equation or the Balance Sheet An Accounting Equation is based on the 'Dual Aspect Principle', which that every business transaction has two aspects, a debit and a credit of equal amount. In other words, for every debit, there is a credit of equal amount in one or more accounts and vice-versa. Example: Suppose Harsh starts a business by investing 5,00,000 in cash and takes loan of 1,00,000 from the bank. Now, the assets (cash) in the busines...
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Basic Accounting Terms

By O P Mishra
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  Basic Accounting Terms https://www.blogger.com/blog/post/edit/8860325726841885571/742052499019463619 Entity: Entity means a reality that has a definite individual existence. Business entity means a specifically identifiable business enterprise like Super Bazaar, Hire Jewellers, ITC Limited, etc. An accounting system is always devised for a specific business entity (also called accounting entity). Transaction: A event involving some value between two or more entities. It can be a purchase of goods, receipt of money, payment to a creditor, incurring expenses, etc. It can be a cash transaction or a credit transaction. Assets: Assets are economic resources of an enterprise that can be usefully expressed in monetary terms. Assets are items of value used by the business in its operations. For example, Super Bazar owns a fleet of trucks, which is used by it for delivering foodstuffs; the trucks, thus, provide economic benefit to the enterprise. This item will be shown on the asset sid...
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Admission of a Partner: Capital Adjustment

By O P Mishra
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  CAPITAL ADJUSTMENT: ADMISSION OF A PARTNER At the time of admission of a partner, it may be agreed between the partners that the capitals of the partners may be adjusted as per agreement. The adjustment may take any of the following forms: Case l. Determination of Capital of New Partner on the basis of Old Partners' Capital. Case 2. Adjustment of old Partners' capital on the basis of New Partner's capital. Case 3. Total capital of Reconstituted Firm is given which is to be adjusted in New Ratio. Case 1: Determination of Capital of New Partner on the basis of old partners’ capital Sometimes, at the time of admission, the capital of the new partner is not given and expected to bring capital on the basis of capitals of old partners. There can be net) situations: IA. When the New Partner is required to bring Proportionate Capital. (In this case, Capital of Firm is calculated on the basis of total adjusted capital of old partners), 1B. When the New Partner has to ...
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